Loreal diversification strategic management
-
Upload
jagjeet-saini -
Category
Marketing
-
view
3.469 -
download
6
Transcript of Loreal diversification strategic management
![Page 1: Loreal diversification strategic management](https://reader034.fdocuments.us/reader034/viewer/2022050616/55866d24d8b42a26728b46d7/html5/thumbnails/1.jpg)
![Page 2: Loreal diversification strategic management](https://reader034.fdocuments.us/reader034/viewer/2022050616/55866d24d8b42a26728b46d7/html5/thumbnails/2.jpg)
A corporate growth strategy in which a firm
expands its operation by moving into a different
industry
Many reasons or motives for diversification
Two major types of diversification
◦ Related (concentric) diversification
◦ Unrelated (conglomerate) diversification
![Page 3: Loreal diversification strategic management](https://reader034.fdocuments.us/reader034/viewer/2022050616/55866d24d8b42a26728b46d7/html5/thumbnails/3.jpg)
Risk reduction and/or spreading
To make use of surplus cash flows
To build shareholder value
To Grow
To more fully utilize existing resources and
capabilities
![Page 4: Loreal diversification strategic management](https://reader034.fdocuments.us/reader034/viewer/2022050616/55866d24d8b42a26728b46d7/html5/thumbnails/4.jpg)
4
Diversification implies two levels of strategy
1. Business-Level Capabilities/resources to create competitive advantage within each business -low cost - differentiation-focused low cost - focused differentiation- integrated low cost/differentiation
2. Corporate-Level Capabilities/resources needed to create value across businesses
![Page 5: Loreal diversification strategic management](https://reader034.fdocuments.us/reader034/viewer/2022050616/55866d24d8b42a26728b46d7/html5/thumbnails/5.jpg)
RelatedRelated Diversification Diversification
◦ share activitiesshare activities
◦ transfer core competenciestransfer core competencies
◦ Eg. Kraft foodsEg. Kraft foods
UnrelatedUnrelated Diversification Diversification
◦ More efficiently allocate internal capital More efficiently allocate internal capital
◦ restructurerestructure
5
![Page 6: Loreal diversification strategic management](https://reader034.fdocuments.us/reader034/viewer/2022050616/55866d24d8b42a26728b46d7/html5/thumbnails/6.jpg)
![Page 7: Loreal diversification strategic management](https://reader034.fdocuments.us/reader034/viewer/2022050616/55866d24d8b42a26728b46d7/html5/thumbnails/7.jpg)
![Page 8: Loreal diversification strategic management](https://reader034.fdocuments.us/reader034/viewer/2022050616/55866d24d8b42a26728b46d7/html5/thumbnails/8.jpg)
Key Facts and Figures
1st cosmetic group worldwide
1 century of expertise in cosmetics
23 international brands
19.5 billion euros of sales in 2010
130 countries
66,600 employees
612 patents registered in 2010
![Page 9: Loreal diversification strategic management](https://reader034.fdocuments.us/reader034/viewer/2022050616/55866d24d8b42a26728b46d7/html5/thumbnails/9.jpg)
DIVERSIFICATION STRATEGY“Closely-related” Dermatology
Entering three kinds of industry:
Cosmetics
The Body Shop
![Page 10: Loreal diversification strategic management](https://reader034.fdocuments.us/reader034/viewer/2022050616/55866d24d8b42a26728b46d7/html5/thumbnails/10.jpg)
COSMETICS INDUSTRYOffering different product lines through four market lines:
Professional Products
![Page 11: Loreal diversification strategic management](https://reader034.fdocuments.us/reader034/viewer/2022050616/55866d24d8b42a26728b46d7/html5/thumbnails/11.jpg)
COSMETICS INDUSTRY
Consumer Products
![Page 12: Loreal diversification strategic management](https://reader034.fdocuments.us/reader034/viewer/2022050616/55866d24d8b42a26728b46d7/html5/thumbnails/12.jpg)
COSMETICS INDUSTRYLuxury Products
![Page 13: Loreal diversification strategic management](https://reader034.fdocuments.us/reader034/viewer/2022050616/55866d24d8b42a26728b46d7/html5/thumbnails/13.jpg)
COSMETICS INDUSTRYActive Cosmetics
![Page 14: Loreal diversification strategic management](https://reader034.fdocuments.us/reader034/viewer/2022050616/55866d24d8b42a26728b46d7/html5/thumbnails/14.jpg)
THE BODY SHOP
A chain of cosmetic storesspecializing exclusively inhair and skin care products
based on naturalingredients.
Operated a total of 2,550stores in 62 countries
worldwide by the end of2009.
![Page 15: Loreal diversification strategic management](https://reader034.fdocuments.us/reader034/viewer/2022050616/55866d24d8b42a26728b46d7/html5/thumbnails/15.jpg)
DERMATOLOGY
Galderma Laboratories: ajoint venture with Nestle. It
boasts three of the top 25best-selling drugs.
It specializes in skindiseases and skininfections.
![Page 16: Loreal diversification strategic management](https://reader034.fdocuments.us/reader034/viewer/2022050616/55866d24d8b42a26728b46d7/html5/thumbnails/16.jpg)
REASONS OF DIVERSIFICATION
1Part of L’Oreal Long TermStrategy
Exploiting RelevantEconomies of Scope2
Strengthening External Growth
3 Meet Consumer Needs
![Page 17: Loreal diversification strategic management](https://reader034.fdocuments.us/reader034/viewer/2022050616/55866d24d8b42a26728b46d7/html5/thumbnails/17.jpg)
STRATEGIC CHOICE
InternalGrowth
Resources
Asset
ExternalGrowth
Diversification
(M & A)
Alliances
![Page 18: Loreal diversification strategic management](https://reader034.fdocuments.us/reader034/viewer/2022050616/55866d24d8b42a26728b46d7/html5/thumbnails/18.jpg)
GROWTH STRATEGY“Merger and Acquisition”
Objectives:
Satisfying local needs.
Creating a portfolio of distinctive butcomplementary products and brands.
Quickly acquiring new resources andtechnologies.
Overcoming the entry barriers.
Reaching a critical size for exploiting
economies of scale.
![Page 19: Loreal diversification strategic management](https://reader034.fdocuments.us/reader034/viewer/2022050616/55866d24d8b42a26728b46d7/html5/thumbnails/19.jpg)
CHARACTERISTICS OF
COMPANIES ACQUIRED
Operating indifferent geographical markets from those inwhich L’oreal is already operating.
The Body Shop: Enters India Easily
Offering products that complete the L’oreal portfoliobrands or products.
ROGER&GALLET: Produces Pharmacy Fragrance
![Page 20: Loreal diversification strategic management](https://reader034.fdocuments.us/reader034/viewer/2022050616/55866d24d8b42a26728b46d7/html5/thumbnails/20.jpg)
CHARACTERISTICS OF COMPANIES ACQUIREDOperating in geographical markets in which L’oreal intends to
reach leadership position.
Inneov: Number 1 in Spain
Having high technology and compet hL’oreal products.
Vichy: Advanced Skincare Technology
![Page 21: Loreal diversification strategic management](https://reader034.fdocuments.us/reader034/viewer/2022050616/55866d24d8b42a26728b46d7/html5/thumbnails/21.jpg)
ACQUISITION PREPARATION
FLOWCHARTPreparation
(Gatherinformation)
Decision(Implementation)
FinalPreparation
Similaritieswith L’oreal
Characteristics
What is theObjectives?
![Page 22: Loreal diversification strategic management](https://reader034.fdocuments.us/reader034/viewer/2022050616/55866d24d8b42a26728b46d7/html5/thumbnails/22.jpg)
IMPLEMENTATION
L’Oreal has acquired more than 25 brands with differentmarket segments (see acquisition timeline).
Each brands contributes a different advantage forL’Oreal long term strategies.
The Body Shop makes L’Oreal distribution broader.
![Page 23: Loreal diversification strategic management](https://reader034.fdocuments.us/reader034/viewer/2022050616/55866d24d8b42a26728b46d7/html5/thumbnails/23.jpg)
ACQUISITION TIMELINE1990 1995 2000 2005 2010
ProfessionalProducts
ConsumerProducts
LuxuryProducts
ActiveCosmetics
The BodyShop
![Page 24: Loreal diversification strategic management](https://reader034.fdocuments.us/reader034/viewer/2022050616/55866d24d8b42a26728b46d7/html5/thumbnails/24.jpg)
RISK MITIGATION STRATEGYIncreasing patent rights on its inventions.
Innovation and PatentRebuild the products to get customers’attention.
Patents, R&D Expenditures and Employees at L’Oreal2001 2003 2005 2007 2009
Registered 493 515 529 576 674patents
R&D 432 480 496 560 609expenditures(mill. Euros)
R&D employees 2,743 2,921 2,903 3,095 3,313
![Page 25: Loreal diversification strategic management](https://reader034.fdocuments.us/reader034/viewer/2022050616/55866d24d8b42a26728b46d7/html5/thumbnails/25.jpg)
MARKETING MITIGATION
Market different product with different target market.
Develop a clear positioning statement as a current market leader.
![Page 26: Loreal diversification strategic management](https://reader034.fdocuments.us/reader034/viewer/2022050616/55866d24d8b42a26728b46d7/html5/thumbnails/26.jpg)
MARKETING MITIGATION
Try to be the first mover - to gain more market share before other.
![Page 27: Loreal diversification strategic management](https://reader034.fdocuments.us/reader034/viewer/2022050616/55866d24d8b42a26728b46d7/html5/thumbnails/27.jpg)
PRODUCTS STRATEGY
Collaboration with Channel Partners
Licensee
Hair Salons Mass Market
Retail
Partners
Department
Market Research Agencies
Stores,Perfumeries
Pharmacies,Dermatologists
![Page 28: Loreal diversification strategic management](https://reader034.fdocuments.us/reader034/viewer/2022050616/55866d24d8b42a26728b46d7/html5/thumbnails/28.jpg)
ALIGNING WITH NATURE’ STRATEGY
Commitment toSustainable Development:
Reducing impact on natural capital.
Responsible sourcing.
Eco-designing new ingredients.
Addressing controversy on ingredients.
Protecting the global system.
Biomethanisation Unit at Libramont Plant:100% Green Energy
-50%
GREENHOUS
E
GAS EMISSION
Target for 2015
-50%
WASTE
GENERATED PER
FINISHED
PRODUCT
Target for 2015
-50%
WATER
CONSUMPTION
PER FINISHED
PRODUCT
![Page 29: Loreal diversification strategic management](https://reader034.fdocuments.us/reader034/viewer/2022050616/55866d24d8b42a26728b46d7/html5/thumbnails/29.jpg)
NEWEST ACQUISITION:
PACIFIC BIOSCIENCE LABORATORIES
Date of Acquisition: Dec 15th, 2011.
Intermediated by L’Oreal USA (thefranchisee).
Products: Sonic Skin Care Devices(Patented).
Channels: Dermatologists andPrestige Retail.
Main Market: US.Reasons behind Acquisition:
Pacific Bioscience Laboratories’Expertise in Devices.
![Page 30: Loreal diversification strategic management](https://reader034.fdocuments.us/reader034/viewer/2022050616/55866d24d8b42a26728b46d7/html5/thumbnails/30.jpg)
Size alone does not guarantee firms an advantage.
◦ Coordination required to exploit economies of scale and
scope is not without cost.
◦ Size creates additional challenges and difficulties, including
problems of communication and coordination.
Higher levels of diversification are not incompatible
with high performance -- nor do they necessarily
imply that firms will suffer lower performance levels.
![Page 31: Loreal diversification strategic management](https://reader034.fdocuments.us/reader034/viewer/2022050616/55866d24d8b42a26728b46d7/html5/thumbnails/31.jpg)
Critical factor in determining success is the level
of management expertise in formulating and
implementing corporate strategy.
◦ More difficult for diversified firms.
◦ Managers of large diversified firms possess a variety of
well-developed mental models that provide them with
powerful understandings of how to manage their firms.
![Page 32: Loreal diversification strategic management](https://reader034.fdocuments.us/reader034/viewer/2022050616/55866d24d8b42a26728b46d7/html5/thumbnails/32.jpg)